8 questions to ask BEFORE hiring a financial planner

When meeting with a financial planner for the first time, many people are hesitant to ask questions because they don't want to sound “dumb”. But dumb is not asking any questions at all.

Ultimately, you have the opportunity (and responsibility) to interview the planner to see if he is the right person to manage your investments. Before you decide if a particular financial planner is right for you, you should ask him some basic questions.

What Will I Find on Your U4?

Remember when you were younger and you could always hide your grades from your parents? That was until the report card was sent home. The U4 is the “report card” of your financial planner's background. That means if he's done anything wrong and a complaint has been filed against him, it will be shown here.

By asking the financial planner if there's anything on his U4, you're finding out if he's committed any wrong-doing. The best part is that if you don't believe the financial planner's answer, you can always log on to finra.org to find out if the financial planner is telling you the truth.

How Much Do You Charge?

You would think that this would be a common question. But many folks feel that it's impolite to ask how much a financial planner charges. If you were getting your car worked on, wouldn't you ask the mechanic how much it was going to cost? Don't be shy in asking this question.

There are many different ways that financial planners make money. They may be commission-based, fee-only, fee-based — or a combination of the three. Asking what the planner charges will help you know exactly what you are paying throughout the working relationship. If she explains but it still doesn't quite make sense, have her put it on paper so that it's crystal clear.

Those are the two basic questions. Here are some more in-depth questions you could ask:

How Many Clients Do You Have?

Here's a quick story to help drive this point home.

At my old firm, an elderly gentleman walked into the office to drop off a check. As the elderly man waited, he struck up a conversation with one of the advisors in the office. They were from the same hometown.

After the man left, the branch manager — also from the same hometown — approached the advisor and asked, “How do I know that guy?”

“Well”, the advisor said, “that guy is from our hometown, and he's actually your client”.

The branch manager had more clients then he knew what to do with. So many, in fact, that he didn't even recognize one who had walked into the office. This is a prime example of how many advisors take on more than they can handle. Asking your planner how many clients they have will help you understand how much you will be serviced going forward. Do you want to be treated as a person or just a number?

What Do You Drive?

This is a good question to ask for many reasons.

For one, if you have an issue with working with somebody that drives an exotic foreign car, then maybe this planner doesn't have the same values that you have. Also, if you're “green” conscious and want to do green investing and your financial planner drives a large SUV, then maybe you both won't see eye-to-eye.

Asking what she drives will help understand whether you and the advisor share core values that will enable you to work together successfully over the years to come.

Have You Ever Been Fired?

Ask your planner if he's ever been fired by a client. In our industry, it's actually very common to start a relationship with a client but then have things things not work out. Sometimes it could be the planner's lack of service. Other times it could just be a clash of personalities. Nonetheless, the planner should be very open if he has been fired before.

If the advisor is able to share a few stories, it will help you to understand why a client would have gone elsewhere. It's an uncomfortable question, and seeing how an advisor responds should give you an indication of the character of the planner.

What's in Your Portfolio?

If the planner is describing her investment strategy as implementing proper asset allocation and diversification, yet when you look at her portfolio it contains only technology stocks, will you really want to follow her advice? Shouldn't she practice what she preaches?

If the financial planner is willing to show you some of the holdings in her portfolio, it might help you to believe in her investment strategy. Would you trust somebody selling Goodyear tires if she had Bridgestone on her car? Exactly.

Are You Married?

You need to really know your financial planner. Face it: When you meet with a planner, they get insight into your entire life history. Isn't it fair to get insight into his life, too? If your planner has (or had) a rocky home life, then maybe he has too many things going on in his personal life to truly service you and your needs going forward.

Does that mean a planner has to be married to be able to take care of you? Of course not. I used to work with a planner who was having marital problems and it strongly affected his business. He wasn't able to focus on his clients, and because of that he eventually got out of the business. You just want to make sure that a planner can focus on your needs.

How Long Do You Plan to be in the Business?

If you search for a financial planner and find one that fits your needs, what happens when she retires? Does she have a sufficient exit strategy plan in place? Maybe a younger advisor that is going to fill her shoes. If so, does that younger financial advisor fit the criteria that you used to hire the first advisor?

Getting a sense of how long your new-found planner will be in the business, and what her plans are after she leaves, may help put you at ease knowing that you made the right decision for years to come.

Have you met with a financial planner? If so, what did you ask before hiring her? Are there other questions you wish you would have asked? Share your thoughts. (And once you've found an advisor that works for you, check out my article about questions to ask your financial planner about your situation.)

Jeff Rose is an Illinois Certified Financial Planner and co-founder of Alliance Investment Planning Group. He is also the author of Good Financial Cents, a financial planning and investment blog. You can also learn more about Jeff at his website Jeff Rose Financial.

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the weakonomist
the weakonomist
11 years ago

So you’re telling me a financial planner with a bright yellow Porche may not be the right planner for me? I should probably give him a call… I met with a planner once but it was merely for research. I didn’t ask about their personal life but did ask all the other questions. One additional question I had for them was a work history. Where did you work before coming here? Why did you leave your prior position? How did you come to work where you do now? I like advisors that used to work for commission but hated it… Read more »

Nate @ Debt-free Scholar
Nate @ Debt-free Scholar
11 years ago

I would also be interested in talking to other clients.

Thanks,
Nate

Studenomics
Studenomics
11 years ago

Great post Jeff. I believe it’s good to know what’s going on in their life because you want someone that is not only ambitious and intelligent but that they have a clear mind while dealing with your money.

Wise Money Matters
Wise Money Matters
11 years ago

Great article. In the current economic climate, you need to be especially careful when talking to anyone about anything regarding money. There are plenty of shady people out there right now trying to simply make money off of you. Getting a good financial planner that you can trust and you see eye to eye with is important.

Luke
Luke
11 years ago

I particulalry liked the idea of asking “what do you drive?” I was looking for a contractor once to do some work around our old house, and the first guy rolled up in a brand new Hummer with a custom ad wrap of his company logo/graphics. The second guy pulled up in a 15 year-old pickup truck with a rusted hood and an old toolbox in the back. Guess which one I hired?

MattJ
MattJ
11 years ago

I have a somewhat different take on a couple of your questions: How many clients do you have? A financial planner who makes $70k/year from 2 clients has to make, on average, $35k off of each of them. His salary can’t come from anywhere else, right? Being treated like a number may have some advantages if it means you’re sharing the cost of the planner’s salary with more people. That is, I would expect that a multimillionaire can afford to pay the full cost of one or more financial planners, while a blue-collar guy pulling in $45k/year may not be… Read more »

Peter
Peter
11 years ago

Some of these questions are great, but the ones about “What do you drive”, “What’s in your portfolio”, “Are you married” and “How long do you plan to be in the business?” are completely irrelevant. I don’t really care what you drive. If your fees are fair and you do a good job I don’t care if you walk to work or come in a chauffeured limo. Same with the marriage question. Your personal life is your business. As long as you are professional enough to not let it affect your work, I don’t care what’s going on at home.… Read more »

Julie
Julie
11 years ago

I hardly ever comment, but I just want to say that I really disagree with asking them if they’re married. It wouldn’t be your business to ask your nurse if she had any chronic health problems, and the marital status of someone (although usually pretty obvious by the ring) is really none of your business. They are merely a professional offering you a service, and those people are still entitled to their own privacy.

Brenda
Brenda
11 years ago

@#5 – Luke, I really don’t know which one you hired. Some people would hire the guy with the old pick-up, because they’d think the guy with the Hummer would charge far too much for his services (having acquired the Hummer by bilking his customers and then squandering the money on status symbols). Other people would hire the guy with the Hummer, because they’d feel the guy with the ratty old pick-up/tools wouldn’t care enough to do a good job on their house (if he can’t care enough to take care of his tools and keep them rust-free, why would… Read more »

UnderstatementJones
UnderstatementJones
11 years ago

It may well be illegal to ask if your planner is married. I don’t know the law on contract folks like planners, but an employer definitely can’t ask about marriage, because of discrimination worries. Mostly it’s to prevent people from ducking maternity leave by not hiring people who might get pregnant.

The Personal Finance Playbook
The Personal Finance Playbook
11 years ago

I might also ask about the person’s education history. I don’t think it matters as to whether the person can be a competent planner. I’m sure a person who studied music theory could learn to be a planner afterward, but I think it’s a valid getting to know you question and it gives them a chance to explain how they got from here to there. Good post.

Jeff R.
Jeff R.
11 years ago

I agree with Brenda. I’m not sure which contractor Luke hired either. 🙂

I would personally hire the guy in the pickup truck, so maybe the answer to this question isn’t so obvious.

In fact, I would rather hire a financial planner that drove a cheap, used car. That shows to me that the person values money to not waste it on such a luxurious, depreciating asset. It would look to me that the person values keeping costs low.

Jason
Jason
11 years ago

Why don’t people look at this like a job interview? That’s essentially what it is, you are hiring someone to do work for you. Here’s some better re-phrasing of the questions so they actually get the answers you want. “What will I find on your “report card”?” What’s really being asked here is “What’s on your U4, and can I see it?” Ask that. “How much do you charge?” Ask for them to provide a written fee schedule and explain it to you. “What’s in your portfolio?” A valid question, but verging on the personal. They may be in a… Read more »

Brent
Brent
11 years ago

I like asking what the financial planner drives, but I’d follow up with “Why?” and “What would you like to drive?” The answers might be revealing.

Beth
Beth
11 years ago

UnderstandmentJones beat me to the comment 🙂 I would never ask if someone was married. I would be offended if someone asked me because people either assume 1) if you’re a woman and married, that means you must want kids and will be taking time off soon to have them, and your family will be your priority rather than your work. Or 2) If you’re not married, there is something wrong with you and you don’t really understand the demands of family life. Chances are what you really want to know is if your financial planner has the experience and… Read more »

J.D.
J.D.
11 years ago

Note that the U4 vs. report card thing is my doing. Jeff wrote the question as asking about the U4 but I thought it was too esoteric. I’ll fix that for future Googlers. I’m in the airport now though and writing on my phone so can’t make the change. 🙂

Paul
Paul
11 years ago

What a useless post. What do you drive? Are you married? Are you kidding me?

What if *she* lives in New York City and doesn’t need to drive?

What a pathetic, small world view post. How was your tea bagging party in -yawn- Illinois?

Amy Rasch
Amy Rasch
11 years ago

You said it Paul. I’m actually unsubscribing from this site due to this offensive post.

Doug
Doug
11 years ago

I’m with most of the other commentators here with regard to the marriage question. It really made me uncomfortable when the author stated that one should ask if the advisor is married. I think it’s totally out of bounds and would be uncouth to ask. Since this is somewhat similar to a job interview, I would find it bizarre if someone asked me that when I was interviewing for a job.

Kim
Kim
11 years ago

I think it’s totally inappropriate to ask a potential planner some of these questions. If fact, it might even be illegal to ask if he/she is married.

Chris
Chris
11 years ago

The system is not set up for your “average joe”, unfortunately. If a planner charges 1% and you have a $100,000 account (which most people do NOT), the revenue for the advisor is is $1,000 per year… Wait.. ACTUAL revenue the advisor takes home is roughly half that, depending on where they work.. Not it’s $500… Wait.. Taxes, etc.. Now the advisor is taking home about $350 per year. Don’t complain if the advisor has a few clients. He/she has to eat, too. For what it’s worth, I subscribe to the asset based fee. That seems to best align the… Read more »

Ragnorok
Ragnorok
11 years ago

I’ve met with a financial planner and having done so, I feel that some of these questions just don’t work. They are great in theory, but when you’re sitting there face to face with another human being, I hope most people would not be so rude and intrusive into matters of someone’s life that have only tangential bearing (if any) on your business relationship. A guy driving a Benz is incapable of relating to or understanding me because he drives a better car than me? Really? Knowing what kind of car a planner drives tells you almost nothing about that… Read more »

Kevin
Kevin
11 years ago

Every dollar a so-called “advisor” makes is a dollar that comes directly out of your retirement savings. Actually, it’s $2-4, because he/she hadn’t taken it out this year as commission, it would’ve doubled or quadrupled, depending on how much time it would’ve sat in there and grown. You don’t need a financial advisor. Fire him/her. Spend a little time doing your own reading, invest in the lowest-fee index funds you can find, spread your money around a bit, and keep other peoples’ hands out of your cookie jar. Nobody cares more about your wealth than YOU. And nobody knows what… Read more »

Jeff Rose
Jeff Rose
11 years ago

“Are you married?” Seems that question has caused a bit of a riff 🙂 First, as a financial planner let me say that I would not be offended if somebody asked me that question. In fact, I’ve been asked that several times. Let’s see if I can explain my position. I’m a very open person and want each client to feel like I’m not just their financial planner, but I’m also their friend. Maybe it’s my Midwest upbringing, who knows. But I just feel more comfortable opening up to a client especially after I’ve asked them to open up to… Read more »

Mandy
Mandy
11 years ago

Great post! I think all the questions are good to ask! People need to remember that when you are “interviewing” a financial planner, you are essentially trying to get to know them on a business level and a personal level to see if they are the right fit for you. Although it is similar to a job interview…the customer interviewing the FA is not the same as an employer interviewing a potential job candidate and will not be “in trouble” for asking if the FA is married or what kind of car they drive. These are actually legit quesitons that… Read more »

Matt
Matt
11 years ago

I asked the planners I was interviewing if I should pay off my house. This draws many responses but gives you a great perspective on their financial philosophy. As does asking what they drive. As for asking if they’re married – – obviously it’s irrelevant to some but very relevant for me. Not only did I hire a financial advisor but a ‘life coach’ of sorts. If he’s going to be advising me what to do with my money based on my life I want him to be able to see things from my married-with-children point of view. To not… Read more »

Another Aaron?
Another Aaron?
11 years ago

A lot of these questions are important to see how the financial planner will react to them. Often times, it’s more important how someone responds to a question than what their answer is. I actually did study music composition in college, but I can tell you how that relates to what I do now (life insurance related). You want to know that your financial planner is a thoughtful person who is ready to take appropriate actions – or else why hire them? With complex and abstract concepts, it’s important to find a good advisor. Without an easy way to simplify… Read more »

Steve
Steve
11 years ago

+1 to “some of these questions would be illegal if they were asked in a job interview.” The would be illegal for a good reason – because they are both invasive of the interviewee’s privacy, and irrelevant to their qualification for the job in question. That is just as true for a financial planner.

Jason
Jason
11 years ago

For the people who are “OK” with answering personal questions in a business setting, keep in mind a couple of things: – It’s possible that your “great” home life may unravel. Your spouse could leave you. You could leave your spouse. Your spouse could die. Your kids could get some horrible disease. Do you want every client coming in and saying “so, how’s the wife and kids?”, then either being forced to lie, or having to inform your client that something horrible happened? – It’s possible that you will encounter people who take on life differently and actually LOSE clients… Read more »

Tyler Karaszewski
Tyler Karaszewski
11 years ago

Last week J.D. drove a domestic car. This week he’s driving a foreign one. Man, that guy must no longer share my values, I’m totally not reading his blog anymore. Do you seriously think it would be OK for someone to not hire you because they didn’t like your car? And what are you supposed to do with the answer to “Are you married?” If they say “no” are you supposed to get up and walk out and accuse them of not being middle-America enough to work with your finances? These are ridiculous questions. You might as well ask who… Read more »

Bozo
Bozo
11 years ago

I think I might start with a rather open-ended question, such as “why should I hire you?” I suspect the response will tell you 90% of all you need to know. If the financial planner launches into a pitch for a particular product, be wary. If the financial planner assures you he or she can “beat the market”, be wary. If the financial planner tries to impress you with complex jargon, or claims to have proprietary systems for money-management, be wary (think Madoff, here). When all is said and done, as others have noted, it’s a job interview. Ask that… Read more »

Mr. ToughMoneyLove
Mr. ToughMoneyLove
11 years ago

Before hiring a financial planner, there is an important question you should ask yourself: Does this person really know more about what is best for me financially than I do?

For some people – those willing to do a little work on their own – the answer will be “no.”

Annie Blue
Annie Blue
11 years ago

I have to agree that you want the planner’s values to be in line with yours. For example, I have two friends who are accountants and one offered to helped me plan things. After a bit of discussion I found he was more than comfortable with having a lot debt, something that gives me nightmares. His lifestyle and hobbies are very different than mine and he didn’t identify with spending money on A instead of B, like he would. The other friend however is living a lifestyle that I want. In fact she’s 10 years older than me and it’s… Read more »

Wilhelm Scream
Wilhelm Scream
11 years ago

Asking what they drive is an interesting move and one which could be quite revealing, but “Are you married?” is totally inappropriate and won’t tell you much! In fact, it may make them dislike you.

Cal
Cal
11 years ago

Strongly disagree with the author! Marital status has nothing to do with how well an advisor can manage your finances. Unfortunately what’s implicit in this article is that a financial advisor is only worthwhile if he has a beautiful wife, 2 kids, a white picket fence, and is a member of the PTA.

Dennis K
Dennis K
11 years ago

Do you really need to hire a financial planner in the first place? What will a planner do? Help you “beat the market?”
Prudent investors don’t need to beat the market. So joining the market with index funds would generate better yields over time than any financial wizard could.

KF
KF
11 years ago

Jeff, You make a logical point regarding knowing about someone’s “home life” to make sure it won’t take away focus from their work. But, I still don’t see the point in asking such questions, because in addition to being presumtive and possibly discriminatory, they are unlikely to yield useful information. If I asked anyone during a one of my first few meetings with them about their marriage, I doubt the person would say, “actually my wife/husband is cheating on me, we fight every night, and I’m pondering a messy divorce.” Or, “my kid is addicted to meth, which is requiring… Read more »

Meg from FruWiki
Meg from FruWiki
11 years ago

“Are you married?” You got to be kidding! Whether or not they’re married could depend on innumerable factors, few if any of which would impact their job. And if I were asked that, I would be insulted! Besides, do you think they are going to answer that question with, “Yes, I’m married, but we’re having problems”? No! If they’re professional, they’re not going to spill the beans on their home life. So even if you see a ring, there is no guarantee of marital bliss. Likewise, if they’re single it doesn’t mean that they aren’t a catch — nor does… Read more »

Tyler Karaszewski
Tyler Karaszewski
11 years ago

The Wall Street Journal seems to have covered this exact same topic a few days ago. They came up with a significantly different list of questions.

http://online.wsj.com/article/SB123913983139498483.html

Chris
Chris
11 years ago

@ Kevin #11: You are right, but I can also change my own oil if I read the manual, I can mow my grass if I choose, I could make my own pizza if I read a cookbook, I could probably write my own blog if I choose to learn WordPress or the like… Fact of the matter is financial planning/advising, whatever you want to call it is a service, no different than any other. Some people are just not comfortable or inclined to do it themselves, just like any other service. I don’t feel it is fair to demonize… Read more »

Irony
Irony
11 years ago

The only FP I’ve ever talked to told me about his wife and his family and I never had to ask. I think he did that before I told him much about myself, to make me feel more comfortable telling him things about my life/family plans on the more personal side. I thought it was nice that he was open about it. I probably would not have asked.

I think the point of the post is that a good FP is an open book and has nothing to hide, personally or professionally.

Beth
Beth
11 years ago

@ Jeff #24: Would you feel differently about being asked if you were married if you were a woman? It seems to me we females face more discrimination in that area than men. For instance, people don’t look at you and wonder when you’re going on maternity leave or if you’ll decide to stay home with the kids for a few years. (Incidentally, women also bear most of the burden of caregiving for elderly parents, not just children). It’s also more socially acceptable for a man to be single into his thirties and forties than a woman. It’s great that… Read more »

E
E
11 years ago

On a slightly different note, how does one BECOME a financial advisor? What sort of training is required/recommended? I’m just beginning work on my accounting degree, and even if I don’t become a financial advisor professionally, I’d love to have some of the training for my own family’s use. 🙂

Mrs. Micah
Mrs. Micah
11 years ago

The U4 question is a very useful one–especially if you looked them up before and would like to see how they explain anything bad you saw on it. I’d probably bring up any specifics I found on it, in fact. As for married…I think it would be useful for a client to know whether or not they’ll be getting their planner’s attention (and this goes beyond planners, we once had a carpenter who took months to finish some repairs because of a family issue, very difficult). But I don’t think that in an initial interview you could ask any questions… Read more »

Mandy
Mandy
11 years ago

#40 has the best point of all!

Jeff Rose
Jeff Rose
11 years ago

@ Beth

It’s hard for me to answer your question just because I’m not. But you do make a valid point.

I think when people meet with me for the first time they want to know if I’m a real person. Me, being a family man, definitely doesn’t hurt. I could imagine it would be tougher as woman. Thanks for pointing that out.

@ E

Check out an interview I did at The Art of Manliness. I addressed some of your questions.

http://artofmanliness.com/2009/03/11/so-you-want-my-job-financial-planner/

Dylan
Dylan
11 years ago

“Ultimately, you have the opportunity (and responsibility) to interview the planner to see if he is the right person to manage your investments.” I think that statement adds to the confusion about what financial planning is and isn’t. While some financial planners may also manage investments, financial planning is not the same thing as investment management. There are a few other points in this post that I think need to be clarified. Checking a planner’s record on the FINRA Web site only applies to planners that also work as brokers. FINRA regulates brokerage activities, not financial planning. Planners that don’t… Read more »

Jude
Jude
11 years ago

I love your site, but this article is mostly B.S. in my opinion.

1. Many CFP’s that I would recommend to people won’t have a U-4 at all, since they are fee only advisors and governed by the SEC and not FINRA. This shouldn’t be counted as a strike against them.

2. What car does your advisor drive? Who cares? Do you ask your doctor what kind of car they drive? Does it make a doctor’s expertise any less valuable?

3. What’s in your portfolio? Hopefully the advisor’s portfolio reflects what is appropriate for them based on their financial plan.

Chris
Chris
11 years ago

#43 E Becoming a financial planner is not particularly hard. Being a SUCCESSFUL financial planner/advisor is the difficult part. You start off by getting hired by a brokerage firm of some sort to sponsor you to take your licensing exams. You study for and pass the series 7 and (in my case) the series 66. You also will likely have to take the insurance and annuities exam. Anyone with a decent brain can pass all those exams. The most difficult part is the one I have the hardest time with, and coincidentally why I will not likely be a financial… Read more »

KF
KF
11 years ago

Jeff: In your comments and from your article, you come across sounding like someone who is using stereotypes and privilege (being a man, etc.) to woo clients and be “slick.” In the comments you write that “being a family man definitely doesn’t hurt.” I want a financial planner who is good at her/his JOB, not one who tries to impress me with his wife and kid and the white picket fence. And based on divorce rates and a million other statistics, many people living behind the picket fence and the “family man” facade are in fact miserable, immoral or crooks… Read more »

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